Last week, the Committee on Economic and Monetary Affairs of the European Parliament has voted in favour of introducing uniform regulations for the taxation of multinational companies. However, as it is usual in case of tax issues, the final decision lies with the finance ministers.
With 38 Yes to 11 No votes, the vote on 21 February in the Committee on Economic and Monetary Affairs of the European Parliament regarding both reports on the Common Corporate Tax Base (CTB) and the Common Consolidated Corporate Tax Base (CCTB) was very clear. However, compromises were required for this clear result, which in some places of the reports came at the expense of clout.
On average, multinational companies pay 30 percent less corporation tax than companies that operate in only one country. According to OECD calculations, this leads to loss of revenue in respect of corporation tax amounting to about 200 billion euros p.a. The so-called “Common Consolidated Corporate Tax Base” (CCTB) shall remedy the situation in the EU.
Based on the CCTB, uniform Europe-wide rules shall be adopted, as to how large companies have to calculate their profits and the taxes to be paid. In doing so, one would have taken a significant step towards putting an end to the national proliferation of profit calculation options, which is mainly responsible for shifting profits within the EU. This would guarantee that taxes are paid where profits have been generated - a centre piece for fair taxation in Europe.
It should also be seen positively that the EP proposal takes into consideration important critical points of the Chamber of Labour at the original Commission proposal. Hence it provides for the consolidation coming into force at the same time as the harmonisation of the tax base. Originally, the Commission had intended to carry out only the harmonisation in a first step. Apart from that, the report limits the deductibility of interest and cancels the deductibility of equity increases.
Also politically significant is the fact that by determining the digital operating facility and some technical details, the particularities of the digital economy have also been taken into account. Hence, companies with a digital presence in one Member State could be taxed even if they do not have physical premises in this country. Additional important proposals by the Commission on digital taxation are expected for the end of March.
The AK too still sees a clear need for action on the path to a fairer taxation of multinational companies. For example, both EP reports on CTB and CCTB do not provide for a minimum tax rate for corporate profits. This entails the danger that the tax race to the bottom in the EU is even further fuelled.
Also on this week's agenda of the European Parliament was the plenary vote on the draft report of the French MEP (S&D) Emmanuel Maurel on the mandatory automatic exchange of information in the field of taxation. Based on this report, which already had been adopted with a large majority (50 to 2) by the Committee on Economic and Monetary Affairs of the European Parliament the end of January and which has now been confirmed by the plenary, so-called tax intermediaries such as tax consultancies shall be obliged to report tax-reducing constructions, which they design for their clients, to the tax authorities.